Are Gambling Winnings Taxable?
Playing gambling in the United States is legal, while playing gambling you should make a note of the transactions, gambling winnings must be reporting the income to the Internal Revenue Service (IRS) and based on your eligibility of Itemized Deductions you can deduct gambling losses up to the gambling income.
You must be aware of all the procedure and record keeping of the gambling losses you would like to claim on your tax returns, because through records would help save taxes on your tax returns. This article would help you in maintaining the records, following the proper procedure to report your gambling income and claiming gambling losses as a deduction on your United States tax return.
What Are The Types Of Gambling Winnings?
Your winnings through Poker Tournaments, Bingo, Keno, slot machines, Horse Racing, Dog Racing, Hai Ali, other wagering, Sweepstakes, Wagering Pools, and Lotteries etc, are taxable for the federal taxes.
What Are The Reportable Gambling Winnings?
Gambling wings are taxable depending upon the type of gambling, and the income details should be on form W-2G. You should report your W-2G if the below specified rules are applicable.
- Reportable Income from keno game: Winnings are $1,500 or over.
- Reportable income from slot machines or bingo games: Winnings are $1,200 or more.
- Reportable income from poker tournaments: Winnings amount is $5,000 or above.
- Though the winnings are from regular gambling or backup withholding, the winnings are taxable.
- The winnings would be reduced on the basis of option of payer, by $600 or at most $300 of the wager.
Who Will Issue Form W-2G?
You would receive Form W-2G from the gambling entities if your gambling winnings are $1,200 or over from slot machines or bingo, if received amount is $1,500 winnings from keno, and the amount received over $1,500 from poker tournament, in case your gambling winnings are subjected to federal tax withholding.
Is My Gambling Winning Taxable?
All gambling winnings are absolutely taxable until you incurred gambling losses, and your gambling losses can be claimed to the extent of your profits.
What Are The Organizations Exempt From Gambling Winnings?
The organization considered with Tax-Exempt status by the IRS, is tax exempted from federal taxes according to the section of Internal Revenue Code (IRC).
Why Does The Tax-Exempt Organization Conduct Games?
The tax-exempt organizations would conduct games to raise funds, to meet the expenses or operating organization, and socializing the foster fellowship.
What Is The Usual Percentage Of Withholding From Gambling Winnings?
The usual percentage of gambling withholding tax rate is 24%, if the winnings are above $5,000 from Wager pools, lotteries, sweepstakes, dog races, horse races.
How Non Cash Payments Are Considered For Withholdings?
Car in a sweepstakes non cash payment is based on the fair market value (FMV), if the Fair Market Value is over $5,000 after subtracting the price of a wager, then the winnings would be considered for tax withholding at tax rate 24%. The gambling winnings would attract 24% tax withholding and non-cash payment would attract 31.58% tax withholding.
What Is The Tax Percentage Of Tax Withholding and Backup Withholding?
Withholding Tax Rate: An amount is withheld for taxes at 24% tax rate on the amount withdrawn, usually the amount could be winnings, payments, mentioned on form W-G or Form 1099.
Backup Withholding: The backup withholding is applicable if the winner does not submit the below mentioned Taxpayer Identification Number (TIN).
- Individual Taxpayer Identification Number (ITIN)
- Adoption Taxpayer Identification Number (ATIN)
- Social Security Number (SSN)
- Employer Identification Number (EIN)
What Is The Tax Percentage Of Backup Withholding For Foreign Person?
The gambling winnings backup withholding of a foreign entity, foreign person or a non-resident is 30% tax rate.
What Happens If I Am Not Reporting My Gambling Winnings To The IRS or State Income Tax Department?
The IRS would come to know about your gambling winning, and also any legal income you received from any entity, because when an entity pays you if it is a gambling winning or any income a source document is issued to you and also the same income will be reported with the tax authorities.
If you don’t file your income tax return on or before the tax filing due date, the tax authorities may send a notice, non-reporting your income on the income tax returns would attract interest and penalties.
Will I Get Any Source Document Of Gambling Winnings and Losses?
Not every single gambling playing is subject to W-2G reporting, so you may not receive a source document. Your gambling winnings or losses would be mentioned on various forms like: Form 5754, Form W-2G, credit records, cancelled checks, receipts of gambling faculty, wagering tickets.
Can I Get A Tax Deduction On Gambling Losses?
You can deduct gambling losses on your tax returns up to the gambling income, for this you should be eligible for itemized deductions, you cannot claim gambling losses on standard deduction because, either you can choose standard or itemized deductions whichever is higher in deduction.
Example: Gambling loss $15,000 and gambling income is $10,000, so by subtracting the income of $10,000 from winnings $15,000 your claimable gambling loss deduction is $10,000.
What Types The Details and Records are Kept, In Order To Claim Gambling Loss Deduction?
The taxpayers are under compulsion to maintain the complete records of gambling winning and losses, like: log or diary, dates of gambling activity, gambling establishment name and location, persons names of the gambling establishment, type of gambling, wager amount, losses and winnings.
Tax Payers need to maintain the Records for gambling transactions:
- Lottery: Payment slips, unredeemed tickets, and record of ticket purchases
- Slot Machines: Machine number, machine played, date and time.
- Table number: Record table number
- Dog/Horse racing: Wagers, records races etc.
- Keno: Casino credit cards, copies of tickets
- Bingo: Ticket costs, number of games
What Are The Expenses Non-Deductible?
- Losses of Wagering transactions over gambling income
- Meals, transportation and lodging.
Can I Get Help In Understanding About My Deductions and Taxes?
We do understand that assessing tax deductions and income is quite a confusing task, but you need not worry about this. You can upload your form W2-G or any source documents related to your gambling winnings, losses or any type of income. We will thoroughly go through your documents and check your eligibility to claim tax deduction on the tax return, and will provide you with the full tax return as estimated.
Apart from the tax estimate you would be happy to know that, you will be getting free assistance from our tax expert if you receive any audit notice from the tax authorities on your already filed last three years tax returns, you can even speak with our tax experts anytime throughout the year. You can call us for full understanding about our free services or you can even get them on our website.